Discussion Paper Details

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Title: International trade in natural resources: Practice and policy

Author(s): Michele Ruta and Anthony Venables

Publication Date: March 2012

Keyword(s): export tax, natural resources, OPEC, tariff escalation, terms of trade, trade and WTO

Programme Area(s): International Trade and Regional Economics

Abstract: Natural resources account for 20% of world trade, and dominate the exports of many countries. Policy is used to manipulate both international and domestic prices of resources, yet this policy is largely outside the disciplines of the WTO. The instruments used include export taxes, price controls, production quotas, and domestic producer and consumer taxes (equivalent to trade taxes if no domestic production is possible). We review the literature, and argue that the policy equilibrium is inefficient. This inefficiency is exacerbated by market failure in long run contracts for exploration and development of natural resources. Properly coordinated policy reforms offer an avenue to resource exporting and importing countries to overcome these inefficiencies and obtain mutual gains.

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Bibliographic Reference

Ruta, M and Venables, A. 2012. 'International trade in natural resources: Practice and policy'. London, Centre for Economic Policy Research.